G.R. No. 47610; July 17, 1944
THE BACOLOD-MURCIA MILLING CO., INC., plaintiff-appellant, vs. BANCO NACIONAL FILIPINO, ET AL., defendants. BANCO NACIONAL FILIPINO and FERNANDO F. GONZAGA, defendants-appellants.
FACTS
The plaintiff, Bacolod-Murcia Milling Co., Inc., instituted an action to compel the defendant Philippine National Bank to sell to it twelve hectares of Hacienda Helvetia at P300 per hectare, and to declare that defendants Jose de la Rama and Fernando F. Gonzaga have no right to oppose the sale. The hacienda originally belonged to Jose de la Rama, who, on September 30, 1920, entered into a milling contract (Exhibit B) with the plaintiff. Paragraph 9 of this contract stipulated that planters would provide the milling company, at P300 per hectare, all lands the company required for an experimental station (not exceeding 10 hectares), the central site, warehouses, deposits, stores, and railway stations and yards. This contract was recorded as an encumbrance on the title. De la Rama later sold the hacienda to the Philippine National Bank, which executed an amended milling contract (Exhibit C) on August 20, 1936, incorporating the same paragraph 9.
Subsequently, through a series of contracts and transactions involving execution sales and redemptions among De la Rama, the plaintiff, and Fernando F. Gonzaga, Gonzaga ultimately acquired full dominion over the hacienda. In a contract (Exhibit K) dated January 28, 1937, between De la Rama and the plaintiff, it was agreed that the plaintiff would have the right to manage the purchase from the Bank of about 12 hectares of the hacienda, and De la Rama consented to this sale. In another contract (Exhibit O) dated February 23, 1937, between De la Rama and Gonzaga, Gonzaga respected this commitment and consented to the plaintiff’s purchase of the 12 hectares.
On March 9, 1937, the plaintiff offered to buy the 12 hectares from the Bank at P500 per hectare for building houses for its laborers. Negotiations ensued but failed, leading the plaintiff to file this action on June 9, 1937. After the action commenced, on June 24, 1937, the Bank conveyed the hacienda to Gonzaga subject to the outcome of the case. The trial court granted the relief but fixed the price at P1,500 per hectare. Both parties appealed.
ISSUE
Whether the plaintiff is entitled to compel the sale of the twelve hectares of Hacienda Helvetia at the price of P300 per hectare under paragraph 9 of the milling contract, or under any other terms.
RULING
No. The Supreme Court reversed the decision of the trial court and dismissed the plaintiff’s complaint.
The Court held that the plaintiff’s action was one for specific performance, and the terms of the contract sought to be enforced must be strictly adhered to. Paragraph 9 of the milling contract granted the plaintiff the right to purchase land at P300 per hectare specifically “in order that the Mill may carry out the enterprises above mentioned,” which referred to the establishment of the sugar central and related infrastructure. The evidence showed that the plaintiff’s central had already been established and in operation for many years, and the land was now sought for building additional laborers’ houses and a playground—purposes not mentioned in paragraph 9. The Court found that the construction of additional laborers’ quarters was not essential to the operation of the central as an industrial enterprise, as the plaintiff already had housing for its personnel. Therefore, the condition for exercising the right under paragraph 9 no longer existed.
Furthermore, the Court ruled that the stipulations in the subsequent contracts (Exhibits K and O), wherein De la Rama and later Gonzaga consented to the plaintiff’s purchase of the land, did not create an obligation for the Bank to sell at P300 per hectare. These contracts merely expressed consent to a future sale but did not fix the price or bind the Bank, which was the owner at the time. The Bank was not a party to these contracts and was not obligated by them. The negotiations between the plaintiff and the Bank showed that no agreement on price was ever reached. The Court emphasized that it could not fix a reasonable price for the parties, as doing so would amount to making a new contract for them, which is beyond judicial power in an action for specific performance.
The dissenting opinion of Justice Moran, concurred in by Justice Bocobo, argued that the plaintiff’s need for the land to build additional laborers’ houses and a playground was essential for the efficient operation of the mill and the welfare of the laborers, and thus fell within the scope of the milling contract’s purpose. They would have affirmed the trial court’s judgment but modified the price to P300 per hectare.
